CJ fined for attempting to monopolize regional grocery market

Yu Seong-wook, director general of the Business Group Monitoring Bureau at the Fair Trade Commission, speaks during a media briefing at the Government Complex Sejong, Tuesday. Yonhap

The nation's antitrust watchdog has fined CJ Freshway, a food distributor serving large restaurant chains, 24.5 billion won ($17.88 million) for unfairly supporting another CJ affiliate to dominate a regional food ingredient distribution market.

The Fair Trade Commission (FTC) has also ordered CJ Freshway to address and rectify these unfair business practices, which have been detrimental to the interests of small and medium-sized restaurants and small business owners.

According to the investigation by the watchdog, CJ Freshway sent 221 employees to FreshOne and covered labor costs totaling 33.4 billion won on behalf of the company. CJ Freshway established FreshOne in 2009 to strengthen its nationwide food distribution network, with a commitment to creating a co-prosperous ecosystem for self-employed individuals and small business owners across the country.

However, the FTC pointed out that CJ Freshway has effectively aimed to drive these small and medium-sized businesses out of the market.

“CJ Freshway did not consider them as partners for co-prosperity, but obstacles or potential risks for its business,” an official at the watchdog said.

“CJ Freshway and CJ Group teamed up to systemically kick them out of the market in the end.”

CJ Freshway acted as the mastermind behind FreshOne's operations by dispatching hundreds of employees to the company for over 12 years and covering all associated labor costs. This allowed the affiliate to smoothly dominate the market, according to the FTC.

“FreshOne was able to mobilize professional staff at no cost and enhance its competitiveness, which allowed it to gain a significant advantage in the market,” the official said. “The interests of small business owners have ultimately been undermined by the conglomerate.”

The latest investigation is significant because the unprecedented scale of manpower support provided by the conglomerate infringed on the benefits and financial gains of small business operators, the FTC said.

“We will keep toughening monitoring of such unfair support by conglomerates and help build a more fair transaction ecosystem here,” the FTC official said.

In response, CJ Freshway expressed regret over the latest sanction by the watchdog.

The company argued that FreshOne was established through a partnership with regional retail business operators, but the investigation by the authorities distorted this intent.

The dispatched manpower also contributed to increasing sales of CJ Freshway's products, suggesting that the role of the employees extended beyond merely establishing FreshOne to actively enhancing the company's market dominance.

The company also said it plans to file an administrative lawsuit against the FTC.